McKinsey Quarterly

Beyond expats: Better managers for emerging markets

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Five years ago, the independent film Outsourced won over critics with its comic portrayal of “Todd,” a manager who is transplanted from Seattle to India to improve the performance of his company’s call center. In the film, Todd survives numerous cultural misunderstandings, including being pelted with colored powders and water balloons by villagers during a religious festival—all while helping the underperforming unit boost its productivity by 50 percent.

As amusing a movie as Outsourced is, in the years ahead the joke will be on companies that think they can rely on Western expatriates such as Todd to manage and lead operations in emerging markets. Expat managers are notoriously bad at adapting to local culture. What’s more, the presence of these foreigners often fuels a belief among local employees that there is a ceiling on their own potential in the company.

These perennial challenges are becoming more and more acute: as companies in emerging markets grow in number and in strength, they become tougher competitors for multinational companies, for which a dearth of intimate local knowledge is increasingly costly. Furthermore, the war for managerial talent is heating up in the developing world. (One data point: my company’s latest global talent survey finds that the most severe talent gap in China occurs among the ranks of senior management.1 ) Companies with reputations for developing local leaders are far more likely to attract the talent they need to pursue attractive growth opportunities. These opportunities, in turn, will increasingly be found outside of major cities, further heightening the talent challenge, since the practice of attracting expats to—and sourcing local talent from—the hinterlands is uncharted territory for many multinationals.

There is a better way, one which I call pursuing a “reverse expat” strategy. A reverse expat is a local manager who is placed at the helm of a Western-based company’s emerging-market business and then rotated through some of the company’s more mature operations outside of that market. Reverse expats spend a pre-determined amount of time (often a month, though it could be more, depending on their experience level and the complexity of the business challenges involved) immersed in the company’s established operations.

Typically, this involves exposure to major functional areas such as finance, HR, and marketing, as well as experience with different business units that together can provide a robust understanding of diverse customer needs. The reverse expat shadows and role-plays with the local leaders there intensely; observes and absorbs protocols, processes, and practices; and develops a plan for quickly adapting any relevant developed-market practices to the developing country. When executed effectively, this approach dramatically accelerates the development of local managers and ultimately creates a more competitive and sustainable organization. Although not yet widespread, this practice is beginning to take hold.

  • One century-old manufacturer headquartered in the United States, for example, used a reverse-expat strategy to strengthen its leadership team in China and now enjoys a market position there more lucrative than that of its core US operations.

  • A multinational services company recently hired a local manager to lead its business in Vietnam and then sent her on rotations to shadow the company’s managers in China, Sweden, and the United States. The experience helped her identify, and then adapt, a branch-management reporting process she could use back in Vietnam to get better and faster feedback from colleagues in other markets. Moreover, she returned to Vietnam more confident in her ability to present complex service solutions to clients and prospects—a direct result of working closely with the company’s more seasoned managers.

  • And even India-based support centers, such as the one portrayed in Outsourced, are seeing fewer expats: more and more multinationals are tapping locals to run such facilities, after sending the managers to the company’s developed-market operations for necessary training.

These early examples are just the tip of the iceberg. Any multinational that really wants to grow in emerging markets should think hard about implementing a reverse-expat strategy of its own. Here are three suggestions for maximizing the chances of success:

Clarify expectations and objectives

To achieve the full potential of a reverse-expat program, senior executives need to make sure everyone involved understands the purpose and takes it seriously. The immersion process isn’t intended to be a pleasant field trip for the participant or simply an act of good corporate citizenship on the part of the established-market coach. It’s a crucial step toward helping to prepare for a future in which emerging markets may become a company’s most important growth engine. Companies should establish clear objectives for the program, including an action plan for the emerging-market manager upon his or her return home, checklists of issues that Western managers can use to help the effort, and performance-improvement targets that seem realistic to all parties after their time together—and that can be tracked to verify progress.

Focus on coaching

The right learning environment requires a mind-set of empathy, collaboration, and dialogue. Simply imparting functional skills is not enough. Coaches need to schedule significant chunks of time for development discussions and two-way feedback—including opportunities to listen to feedback from the visitors about what they are (and aren’t) learning so that the program can be adjusted accordingly. Also, whenever possible, managers of reverse expats should spend time talking with one another; their collective coaching experiences will almost certainly help enhance everyone’s effectiveness.

Adapt, don’t transplant

Senior executives must impress upon coaches and the visiting managers they are working with that the goal isn’t simply to transplant mature-market practices into emerging markets—these practices are just as likely to fail at the hands of a local or a traditional expatriate manager. Although visiting managers will often intuitively know this, they still need the freedom and encouragement from their home office to adapt new strategies and practices that they can take back with them. The trick, of course, is to establish ground rules that balance innovation, risk taking, and the economic fundamentals of the business. The nature of those guidelines will differ by company; thinking them through in advance is the responsibility of the senior team.

These suggestions are merely starting points; every company embarking on a reverse-expat strategy will obviously need to tailor its approach. And they should begin now. I firmly believe we are nearing the end of the line for Todd and his fellow Western expatriate managers. Only by taking a long-term approach of cultivating local leaders can organizations unleash the potential of their workforces in emerging markets, accelerate growth, and steal a march on their competitors.

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