IRC White Paper - Risky Business

8/7/2019 IRC White Paper - Risky Business

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Recruiting essential (and hard-to- nd) world-classmanagement talent is expensive. With a known

ailure rate o almost hal o all hires, reducing thatrisk must be a high priority.

A. True Costs o Failed Leadership HiresIts a commonly reported statistic that nearly 50 percent o newly recruited leaders in established markets ail in the

rst eighteen months; this trend is very o ten exacerbatedin cross-border, cross-culture appointments. The true cost o these ailures ranges rom the nancial (ten to teen timescompensation package) to the emotional (damage to corporateleadership, employee morale and commitment).Assuming a

six- gure talent pool, costs can easily approach an average o US$500,000 per candidate.

Recruiting new leadership in emerging markets is even moreexpensive and more time consuming than in establishedmarkets. The cost o ailure in emerging markets is evenhigher than in established markets but it is not as easy tomeasure, due to opportunity costs and market share losses to acompetitor. A conservative estimate is two to three times payrollcost, including hal o the salary in return moving costs, hal o salary in selection costs, hal o salary in retaining and retooling,and one times salary in opportunity costs.

For lling key positions outside the US, nding a local nationalhas now become the rst choice o many leading corporations.Yet, the increasing shortage o highly skilled, cross-culturetalent, combined with the high turover rates (o ast developing,competitive markets) are creating challenges in leadershiprecruitment. As executives retire, and experienced cross-cultural

business leaders move on to new challenges, the atalent pool has diminished signi cantly. It will be challenge to build this base back to acceptable lev

The ow o talented pro esto China in the last decade, ananticipated return to a strong position in Mexico, exacerbaleadership challenges, particuthe US, Brazil and Mexico. - Fortune 500 company

In North America, its very attractive or companicandidates with true multi-national experience. Livabroad, versus just doing business internationally, likely to assure a candidate truly understands the g

nuances that can o ten be a actor in doing busineHowever, companies o ten regard expatriate assigcalculated risk. With a known ailure rate o almohires, the exceptions are usually reserved or esseexpensive world-class management talent. Therereducing that risk is a high priority.

B. Recruitment challengesMoving into a new leadership position is recogniztough challenge; doing so in an international mark

an exceptional challenge. As emerging markets dethe demand or top-level talent will increase. In ocompete on a global level, and capture essential mshare, companies will have to nd ways to ensure retention o their top-level, cross-border, cross-cuAnd do so in an ever-escalating talent war.

Global expansion will increase the demand on thsmall talent pool that would approach internationaright way as a way to improve as a person and asHowever, talent selection tends to ocus on globa

standards, and the emerging shi t to cross-border/regional capability is o ten overlooked. The reducpotential leaders willing to take oreign assignmean increasingly important actor and under-reali

Given the shortage o senior-level executives in LAmerica, the expectations o Generation Y pro ealso lead to interesting recruitment challenges.

Risky BusinessThe Global Executive Hire

http://www.ircsearchpartners.com/global-o ces.ht


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n Generation Y leaders will be more receptive to the kind o change a leader aces when he/she goes international.

n While this generation eels more entitled ( exible workschedules; increased training programs; technology; higherpay), they will be more open to cross-cultural work habits.

n The intrinsic motivation and higher expectations o theGeneration Y work orce will widen the gap or talent.

Most companies remain with management practices andcultures stuck in the industrial age. This is especially true orcommercial and industrial companies. Once the momentumpicks up towards the Knowledge Worker Age, companies will be

orced to acclimate to the demands o the Generation Y workersor they wont be able to attract the caliber and intellect o people they need to compete and succeed.

n Respect, reasonable patience and listening skilparamount when working or many Asian com

n European companies tend to be less warm and than Americans. Its no accident that most Eurocompanies tend to transport European nationallead positions in the Americas. While most sucexecutives and companies are open minded, cois too intense or companies to take risks on leplacement.

n Europeans tend to be less expensive, although expect longer vacations this is especially true

n Between Canada and the US, the primary diferamong native English-speaking candidates is Americans tend to have a more direct and less

conservative presentation approach than CanadThere ore, a Canadian going to the US or intneed to be more assertive, and make more aggrclaims to ownership o career successes.

n For US executives making hires or Canadiano ces, there are generally many surprises regadiferences in HR policies.

n Candidates rom South and Central America ndraw clear parallels between the level o disci

sophistication o business practices they have with, compared to those o the US.

n Accents can be con using not only between Central America, and the US and Canada, but the US.

n The talent pool in Canada has a range o ethniwhich can be a surprise to clients rom the US

n Diferent countries in the Americas are at difereo economic or technological development t

the ability to attract top executive talent rom countries.

n While Mexico and Puerto Rico have strong maleaders, many American companies dont valuinternational experience or non-global roles. example, a manager o a manu acturing plantor Brazil might not have the same type o exp

http://www.ircsearchpartners.com/global-o ces.h

The Client: Understanding

(and Appreciating) the Di erencesCultural diferences can easily create an environment or ailure.Ignorance o cultural diferences can lead to complicatedchallenges, interviewing disasters and a key position remainingun lled. For example, staying calm when disaster hits isregarded as a key strength in Mexico and Puerto Rico; in the US,that attitude may be perceived as lacking a sense o urgency.This misunderstanding may lead to a ailure to hire.

Candidates must be open to changing their style to get results attitude is an important tool to success. Interview questionsmust be devised to measure this willingness. Internal recruitersshould be certi ed in speci c behavioral interview trainingtechniques, culture cues and communication norms. Here aresome pointers:

n A companys culture is determined by its leadership.Success ul candidates must have a demonstrated propensityto acclimate to the new culture.


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Cultural diferences between US, Canadian and Latin Americancompanies can lead to a leaders disenchantment with the newcountry, and eventually with the company and the post.

Education, understanding and awareness o these diferencescan reduce the risk o candidate dissatis action and unhappiness.


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in the US, where plants are o ten automated andless labor intensive.

n The work orce rom country to country has uniquemotivations. Whats important or success is to recognizethe diferences and learn to recruit, educate and thenefectively manage.

n Paying attention to talent with de nitive cross-boexperience and cross-border amily history is invExperienced expatriate talent pools can be minedkey leadership people. Frequently, those who havexpatriated are orgotten, and the wealth o globexperience they have acquired is overlooked on rThe expatriate talent pool is a rich source o dataexperience that is too seldom tapped.

The Candidate and his/her amily:Understanding (and Appreciating)the Di erencesThe CandidateMitigating the 50 percent ailure trend should includeinvesting in leader preparation, ocusing on accelerating teamper ormance, explaining cultural expectations within the teamand paying more attention to amily-adaptation issues.

n The best way to evaluate the candidates attitude andcross-cultural experience is to ask probing questions tomeasure their willingness to relocate. This should be

ollowed up with some high-level training as part o theorientation to the new assignment. Some companiesconduct psychological pro ling as part o the process toevaluate their expatriates.

n Executive Search companies can help reduce the 50%ailure rate by bringing a more sophisticated interview

and selection process to the client. Thorough discussionsare essential, covering amily relocation, cultural nuances,

nancial and other bene t variables. These issues mayincrease an already stress ul personal situation or amiliesand the individual - and ignoring them may cause aresulting mis-hire.

n Continuously coaching clients on the cultural diferencesthat may impact on the new recruit and their amilyshould be ongoing corporate considerations.

The FamilyFor the candidates amily, a cross-country relocatioUS, Canada and Latin America can mean subtle, but breaking diferences. These can include: continuity oeducations, housing, social li e, spouse career, eatin

dress and clothing, even dating and socializing issuesexample: eye contact in Puerto Rico rom a student tcan be seen as disrespect ul when the teacher is scolstudent (similar to Japan and many other countries). in North America, lack o eye contact is o ten seen

orthright. Cross-cultural training is key in helping with these types o diferences.

Next moves or the modern expatriateI globalisation is seen as inexorable then comto a greater or lesser extent, will need a globallywork orce tasked with administering their ar-

but rapidly growingoperations. Withdemand stagnatingin Western markets,the pressure to expand abroad in the search

or revenue growth isintensi ying, especially in emerging markets whoperating environment can be particularly chall

But getting the right people in the right place oright length o time to execute that internationastrategy is no simple matter. It involves an arrayconsiderations ... that can overwhelm the hardie

executives. An Economist Intelligence Unit

sponsored by Regu


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n There are very signi cant amily-related issues rom countryto country. Many people will not move their amily to MexicoCity or many Latin countries because o sa ety ears.

n Many Latin American amilies want their children educatedin the US.

n Between US and Canada, the amily dynamic is generallyconsistent, except or a higher level o acceptable businesstravel in the US. Americans are more inclined to relocate,while Canadians typically put more emphasis on work/li ebalance.

n South and Central American candidates generally have largeamilies, and this must be actored into relocation costs.

However, in such amilies, there are usually ewer issues withspousal career/income considerations.

n Child/spousal issues are o ten overlooked in North Americancross-border movement. For example, L1 vs. L2 trans er

remains a signi cant issue as dual career spouses may havelimited work opportunities.

n North America to Europe trans ers o ten result inconsiderable per ormance-ranking issues in schools, withat least one percentage drop in per ormance-distributionscorings in the year o the cross-border trans er. In LatinAmerica, education to North American standards remains atrisk, as levels are generally lower.

n Job titles and, there ore, responsibility and contrto serious misunderstandings. For example, a CEor Canada might not be the equivalent position inIn Latin America, most regional General ManageCountry Managers are titled President and even Cthose titles are reserved or the true corporate entUS and Canada.

n Job titles or manager, director, VP, Jr. VP, Sr. VP Analyst, Supervisor or Manager in Brazil. Howevare generally consistent between the US and Canathe exception o Country General Manager efectseen as the same as President. The US/Canada Dialso have a diferent meaning or an European can

n US and Canadian communication styles are o tendirect (even abusive at times), compared to the peLatin Americans having a more tact ul, calmer p

n

Remuneration styles are diferent, with a higher peo bene ts being indirect in Latin America compthe US and Canada. In Latin America, a total remassessment is required because o monetary and in ation.

n There may be an assumption o an apparent lack willingness in US and Canadian candidates to conpeople, compared to the desire o Latin AmericaBusiness and personal relationships are kept sepaand Canada, while this is not the case in Latin Am

n A US-based client may eel that candidates or aManager role who are o speci c oreign descenbe acceptable in a number o their markets and wthere ore, be limited in international opportunitiethe company.

The SocietyMost global companies have more in common than tdiferences. The communications nuances and biases ways, but a heightened mutual respect must be preva

inside the company. Mistrust o ten exists externally in uences such as the media and the Internet.

n There are many nuances, biases and diferences bestates in the US - as many as there are rom councountry in the Americas. For instance, in the US, people believe that people rom Cali ornia dontgood work ethic, and that people with a southern ignorant. Americans tend to assume Canadians ar

The Ofce and the Society:Understanding (and Appreciating)the Di erencesThe O ceDuring a leadership training session, a coach used some sceneso the movie 300 o Sparta. A trainee rom Iraq was ofended bythe historic approach rom the movie that, in his culture, is a lie.Such disastrous mistakes can be avoided with education and abetter understanding o country and o ce culture.


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and, thereby, miss the subtle distinctions. For example,Americans tend to have an at your post mentality or militarymodel, whereas Canadians tend to approach work with asmarter, not harder mindset.

n Some words that are common in English or examplestupid are considered very ofensive in Brazil.

n Questions related to moral and sexual harassment in Braziltend to be treated with the same rules as the US and Canada.However, there may be less ormality in Brazil.

n Food habits, approach to people in high-level hierarchy orauthority, behaviours at social events, in bars and clubs, andat sport events all require sensitivity. Sometimes, training isnecessary to avoid challenges.

The Dollar DiferenceAccording to the Economist magazine, two separatesurveys*, ound that chie executives and company directorsearned more in So Paulo, Brazils business capital, than inNew York, London, Singapore or Hong Kong.

The numbers:$620,000 or a CEO in the manu acturing sector in San Paulo,and $243,000 or board directors, compared to New Yorks$574,000 and $213,000 respectively. Companies surveyedare in the auto, steel, metal, minerals and constructionindustries, with between 1,000 and 15,000 employees. Inthe nancial sector salaries can be higher, with additionalbonuses up to 23 times a year. On the other hand, Brazilspayroll taxes are among the worlds highest.(All dollar amounts in US currency)*The Association o Executive Search Consultants (AESC); Dasein Executive Search.http://www.economist.com/node/18010831

Good sources or additional research on this topic include:Search Consult:http://events.search-consult.com/agenda.aspx?evt=37&past=true

The Coaching Room:http://www.thecoachingroom.com.au/leadership_development_diagnostics.html

The New Leaders 100 Day Action Plan: How to Take Charge, Build Your Team, and Get Immediate Results; Check, Bradt ahttp://www.getabstract.com/summary/8259/the-new-leaders-100-day-action-plan.html

n Make sure that the expatriate will have the samepurchasing power overseas as they have at home.This can be accomplished through calculatingSalary Purchasing Power Parity (SPPP). This takinto account their Home Gross Spendable Salary,Home Net Spendable Salary, Host Net SpendableSalary, and Host Gross Salary.

n Quarterly, review the Host Gross Salary to gaugethe impact o cost o living due to in ation andthe exhange rate.


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IRC Global Executive Search Partners:Globally Connected. Locally Committed.Stereotypes, ignorance, assumptions and general lack o cross-culture competencies can mean the right people maynot always be given the opportunities they deserve.

Preparing the potential candidate and the company about cultural and corporate diferences takes experienceand local knowledge.

IRC Global Executive Search Partners strives to be the pre erredglobal alliance o integrated, entrepreneurially- ocused retainedsearch rms, delivering exceptional service to clients around

the globe.

IRC Global Executive Search Partners deploys energetic,committed and dedicated pro essionals; who provide global andlocal retained search services o the highest quality or clients ineach market.

n In the spirit o true partnership, all IRC Global ExecutiveSearch Partners member rms support our shared visionand mission:

I work with companies that have presence in both the US and in South America. Prospective talent must have experienceworking in both countries, and have cultural training, overall cross-border education, and language skills.

Biases exist in cross-border and cross-culture searches. That being said, in certain regions o the world, being in touchwith those biases is mission critical because its a businessreality. The culture o every organization is a product o itsenvironment and, while the country and regional bordersare ast becoming very low barriers to do business, success or

ailure (to be efective) is contingent on the executives ability to acclimate to both the corporate leadership and the countriesin which the business operates.

Patrick B. Ropellais president & CEO o The Ropella Group,an international executive search and consubased in Milton, FL, a member o IRC Global Executive Search Partners, specialized in workincorporations. The Ropella Group ocuses on executive-level and mid-level management retmarketing, manu acturing, and R&D. For more in ormation, visitwww.ropella.com(Patrick Ropella at (850) 983orwww.ircsearchpartners.com/global-ofces.html

n IRC member rms emphasize cultural diferencesnot aws:

I educate my clients and candidates about culturin an efort to assure a success ul match, and so wthe best person is hired or the job based on bucompetencies versus cultural nuances. That being

ew minutes o attempted education will not elimbiases rom afecting the outcome o the intervie

I am constantly working with people on both sidborders to understand how to more efectively deaother to get the results both parties need to succee

An exclusive global executive search boutique netwoGlobal Executive Search Partners network has the exbeing globally connected and locally committed, witknowledge you need to ensure your next cross-countculture executive hire is a long-term, cost efective, asatis ying hire.

http://www.ircsearchpartners.com/global-ofces.ht

IRC White Paper - Risky Business

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