using expats to spearhead global expansion

The company has decided that in order to expand globally, it will need to send two expatriates to two different countries. We will need one person in Dubai in order to run our EMEA business, and one person in Hong Kong in order to run our APAC business. This report will present a significant amount of discussion with respect to the business cultures in those cities, in the regions as a whole, and what the company needs to do to ensure a successful expatriate deployment.

The first thing that the company must know is that we cannot send people who have no international experience on this type of assignment. The initial expansion requires people on the ground who understand what they are getting into – they have travelled extensively and done business in the regions in question. The reason for this is that so much rides on these individuals that there can be no early returns or the entire global expansion will be put at risk. This is why it is so critical that we understand what a good candidate for international duty looks like – and in this case to minimize risk we need people who already know what they are getting into. This is simply no job for rookies – if the basics of different cultures need to be explained to a person, they are the wrong candidate.

There are several reasons why these two countries were recommended. They are both major regional hubs and financial centers. They are relatively easy from a visa perspective to send people to. They have airports with a wealth of connections in their respective regions. Hong Kong is particularly central in East Asia, and well-connected with Australia. But since we believe the PRC will be our biggest market, Hong Kong makes more sense. Why the SAR instead of the mainland? It's much, much easier to live. There are certainly entrenched expat communities in Beijing and Shanghai, but my experience is that Hong Kongers speak more English, have modern amenities that are familiar to Westerners, and of course are on the happy side of the Great Firewall. Sydney or Melbourne are obviously even easier places in which to leave, but are at the periphery of the region.

Dubai might seem like an odd choice for EMEA, but this region will include the Indian subcontinent. London is a good option, too, if a bit on the periphery. But Dubai is very well-connected throughout the region, and we see tremendous potential in India. And there is no Indian city even remotely as easy to live in as Dubai. For foreigners, Dubai is actually a fairly low degree of difficulty – even where things like alcohol are concerned, and there is a great expat community there and a full slate of amenities for expats and English is the lingua franca. The only concern that could tip the scale back to London is proximity to home office but for now, Dubai is the choice of office for EMEA.

There is the option of either hiring expats, or working with the local talent pool. We have determined that the local talent pool in our industry is relatively weak in Dubai and Hong Kong, so we will need to hire expatriates to help us identify key talent in those countries, and forge relationships in their respective regions with resellers and other partners. Typically, an expatriate will be able to do these much more easily than somebody who is working from our domestic home office, given things like the need for physical meetings, time zone considerations, and our need to express our commitment to these markets.

There are several risks with expats that management should be aware of. The first is that they are expensive. Not only is there the cost of the expat but that person`s entire living allowance if we are deploying them from here. If they are bringing family, then the cost will be even higher. More on family later.

There is less oversight on their activities. That they are so far physically removed, and in entirely different time zones, makes it more difficult to manage their activities – an expat needs to be a self-starter and needs to have discipline. The company needs to trust the expat implicitly, because of the investment that it is making on that person. A third risk is that of early return due to burnout (Laird, 2015). Expats often burn out, and if they don`t their families do. Starting a foreign subsidiary from scratch with only limited, long-distance support from home office is incredibly stressful, and it puts the expat at risk of burnout. In many countries, the family faces risk of burnout – even if the person you hire can absolutely handle an expatriate assignment, their spouse or children might not handle it nearly as well. Family is a major cause of early return.

The expats must meet the following criteria. First, they must be experienced in their regions. We cannot afford to send a rookie overseas – if seeing menu with only Chinese characters is going to weird someone out, forget it. If Dubai's heat is going to be a problem, forget it. Experience is a must. "Cultural experience" is not a substitute. The experiences of a Chinese-American who was born and raised in the US are not sufficient – this isn't about race, but about one's understanding of others' experiences and the ability to adapt to those. One can be Chinese- or Arab-American and utterly clueless about what it's like to live over there; this is why experience is paramount, above all proxies.

At least one other language is also a must – Mandarin is preferred for APAC, though Cantonese or Japanese could work, too. For most of EMEA, English is the language of business and is widely spoken (Middle East, Indian subcontinent). A major European language (German, French or Spanish) or Turkish is preferred. Arabic is desired but not necessary because English is common in the region.

A third selection criteria is psychographic – the candidate must be determined, patient and infinitely adaptable. Adaptability and openness are two traits associated with successful expat deployments. This is because there will be many challenges, a lot of learning on the fly, and the person has to be able to handle these and other difficult situations without panic, without being discouraged and especially without wanting to run home. The degree of mental toughness required for this assignment, given the change in environment combined with the business stakes, is phenomenal.

There is zero chance that I'm going to offer any incentive to become an expatriate. It's a tough life if you're anything other than fully, 100%, committed. Only those who are genuinely excited about the challenge can fill this job – I want the decision to accept the role to be made entirely on the merits of the assignment itself.

Expatriates are expensive, and the work that they do has to deliver a positive ROI. To ensure this, the right candidate will need to meet a lot of criteria in terms of ability to do the job, but will also need to meet stringent criteria for expatriate deployment. Because the stakes of expatriate deployment are so high, there is a significant body of research surrounding best practices regarding expatriates.

The consulting firm Mercer published a report in 2012 that highlights both the benefits and the challenges of expatriate deployment (Price, Herod & Green, 2012). First, we need to identify the deployment type, as the ex-pat will need to know this prior to accepting the job. If we hire somebody with a vague, open-ended time frame, we increase the risk of failure. The five types of expatriate deployments are:

· Tradition (1-5 years with expectation of return)
· Long-Term (More than 5 years, one country)
· Global Nomad (Career expat, moving from country to country on different assignments)
· Short-term (less than 1 year)
· Localized (Moved to host country, no longer even an expat)

What we are proposing is a traditional expat deployment, where the person will build the business and then at no more than five years return home, unless they choose to stay on as a localized expat. This gives the ex-pat the knowledge they need to make sound decisions about their affairs back home – whether to sell a house, move the family, etc.

The company has to have taken care of all the critical details, including those surrounding benefits and taxes, prior to deployment. To burden the expat manager with these sorts of details will lower the ROI of the deployment and will increase the risk of early return. Health care in foreign countries is of particular concern – both Dubai and Hong Kong have high standards of care on a free market basis, and the company will need to ensure that any health insurance gives them full coverage as they would experience back home. Most traditional expats remain on the home country's pension plan, because of the planned return. Taxation matters will also need to be worked out, including any pay adjustments to cover higher rates of taxation in host countries. Another such detail will be with respect to expense accounts – timely payment matters, given how much money the expat will be spending on both his/her life and on the business.

If there is family involved, their needs will also need to be taken care of. If the spouse is accustomed to working, staying at home might prove a problem. The children will need an international school, and typically child care as well. In some countries, a drive might be required – this is more an issue in Hong Kong perhaps than in Dubai, though driving is relatively easy in both, it is the parking in Hong Kong that is the problem. Basically, any number of basic day-to-day issues can create problems and the company needs to be able to address those in turn.

Minter (2008) notes that inadequate training is done for most expatriate assignments. Even when the company gets the selection process right, without proper training the expat will struggle. The training program cannot be a few manuals and a couple of websites; it has to be comprehensive and given by a subject matter expert. With these assignments, the person will be dealing with multiple cultures. APAC covers Hong Kong, the PRC, Taiwan, Korea, Japan' Singapore, Australia and New Zealand just to start; EMEA the Middle East, the major European cultures and South Africa. The person going will be expected to have experience in the city of residence, but will need to learn how to do business in other cultures as well. If the family is going, they will also need a degree of preparation – especially for Dubai, which is quite different for women. The expat will also need to be briefed on the systems that will be in place to their him/her to the home office – getting these links set up immediately will be critical. That will also mean things like VPNs for doing business in the Arab countries and the People's Republic of China.

Training will need to focus on a variety of issues. There are the typically things we expect in business, such as negotiating tactics, typical sales cycles and the different elements of intercultural communication. But there are a lot of little things that can trip a person up – things you won't learn online but can only come from a professional trainer with first-hand experience in the region. Thus, the training program needs to be incredibly comprehensive, and needs to be run by someone with direct experience. When it comes to expatriate training programs, it's garbage in, garbage out, so a lot of time, money and brainpower needs to be put into the training.

Black and Gregersen (1999) note that expectations for expats are usually very high. The cost of sending someone on overseas assignment is substantial, often making the expat manager the second-highest paid person after the CEO. For this investment, head office typically wants to see immediate returns. On that aspect of the job, there needs to be a clear set of expectations, and clear reporting if there are issues preventing the expat manager from reaching targets. This is one of the major reasons expat managers suffer burnout.

Thus, it is of utmost importance that there is a process in place to manage the expat once the assignment has begun. Clear goals and reporting arrangements are necessary, and there should be a regular flow of communication between the expat and home office. If the expat feels that he/she is under incredible pressure but without any meaningful support, there is a much higher risk of burnout and, ultimately, of failure of the assignment.

With that in mind, it is also recommended that the company has some people that they can start grooming to step into these sorts of roles. It can take a long time to get the right candidate, because you need someone who is incredibly talented and hard-working, but also willing and able to accept and overseas assignment, and has a high likelihood of thriving. As such, it is important that the company immediately commence identifying internal candidates who can be groomed for such positions. This will mitigate the damage of an early return, to have someone who might be able to step in right away and salvage the mission.
Lastly, there has to be full commitment from Management and the Board for this expansion. This means putting up money, now, to get the process started. Once we send someone overseas, the expansion is happening. There is considerable investment required up front – finding the right candidates, training, building communications and support networks, and those costs are our commitment. If there is any doubt as to the timing, it is recommended that we export our product overseas first, to see if there is a market, before committing to an expat. The Board and senior management needs to be as fully-committed to this as the person going overseas.