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"International Search - Things Look Different There"©
by Frank Moscow, President
The Brentwood Group, Ltd.
featured in the High Tech Advisor
"Higher than expected start-up costs (or restructuring charges) in Europe or Asia contributed to higher operating costs and lower profitability for the quarter." Such comments are, unfortunately, all too familiar as North American companies make costly mistakes in expanding globally. We interviewed international operating executives and executive search colleagues throughout Europe and Asia and asked them to provide their wisdom from decades of experience. Their suggestions apply globally. The first two suggestions we will cover in this article and the remaining three will be in the next issue of the High Tech Advisor.
Assume that everything is different and be pleasantly surprised when a few things are the same.
Company cultures in North America are strong, but a company is naïve to think it is going to change established business and social practices of another country. Yet, U.S. companies often impose North American culture and corporate attitudes on local staff without any consideration for local customs, social norms, and market expectations. They also do not give much thought to how customers in another country weigh different factors when making a purchasing decision.
Mark Rowley, managing director of Regent Consulting in London, states "The United States, to some degree, still sees Europe as one land mass and therefore one culture. Imagine if people in New York spoke one language, Chicago a second language, and Los Angeles a third language. Add a few wars between those three cities, and you start to comprehend the cultural differences and rivalries that can make it almost impossible for a manager from Country A to either report to a senior director in Country B or close a new customer in Country B."
"We were worried when a local executive was referred to us to run our new Japanese joint venture because he seemed 'too local,'" recalls David Brinker, formerly vice president international at Mentor Graphics and currently CEO of Webridge. "Communication was hard, and he didn't seem to be very adept at the ways of American companies. It was a real struggle to discuss plans with him, and we were never quite sure if there was mutual understanding or not. It turned out that he was an expert in our business and was very well connected to prospective customers in Japan. Eventually he became the president of Mentor Graphics Japan and our business was a huge success, growing from $0 to $80 MM in annual revenue. The communication challenges continued, but we always managed to get our goals accomplished through his management of our Japanese operations."
Don't put too much of a premium on English-speaking skills.
Mr. Brinker also recalls: "At the same time we hired in Japan, we hired for a managing director/GM in another Asian country. We were overjoyed when we found him because it was so easy to deal with him. He had lived in the Unite States and was very westernized. His language skills and knowledge of American ways were excellent, and we felt right at home with him. A year later we had barely made a sale, and our business was a resounding failure. It was difficult, but we dismissed him and began a search for another country manager. Soon we had another candidate who was somewhat like our Japanese president - very local. We hired him and inside of six months we had landed two big deals. Those experiences served to reinforce our stance on 'going local' and hiring local executives who know the market and the customers, even if it meant taking extra time to make sure communications were accurate and understood. Later, in a different Asian operation, we broke our firmly held principles and engaged an expatriate to be a country manager. He had been very successful in his (non-Asian) home country, and we rationalized that his skills would be transferable. It was a disaster. He immediately alienated the local employees, purely through ignorance of local practices and by trying to directly transport his proven techniques for management and sales to the new country. We narrowly avoided a mass revolt as his hierarchical top-down management and sales style conflicted with the Asian bottom-up culture. We had to correct that mistake by once again hiring a local executive who knew the local market."
Clive Mieville, managing partner at Drouot-L'Hermine in Paris and an international search partner to The Brentwood Group, states: "If you're hiring in France or Germany the best question to ask is what works in France or Germany, not what works in the United States Unfortunately, many U.S. companies have hired executives they feel most comfortable with and as a result missed out on better candidates who would have been more successful in our market."
Avoid headquarters-based compensation packages that don't take local market conditions and practices into account.
"The remuneration package comprises more benefits than in the States. A company car is common to middle and senior management; no matter what functional responsibility they have, and is not seen as purely a method of transportation for the sales representative to meet the customers. Company cars are very emotive and status objects in Europe," states Mr. Rowley.
Anca Poll, managing director of Nassau Recruitment in the Netherlands, says, "U.S. managers always try to negotiate down from the 26 holidays (the norm in the Netherlands) by offering extra money instead of the holidays. They are always very surprised when the employee then refuses and says that he or she prefers the holidays above the extra money. Spending time with the family is a higher priority here than it is in the United States". Also, North American firms typically overpay in central and eastern European countries, a situation that is easily avoided with competent local search counsel.
According to Simon Childs, Managing Director of CDS Consulting in Japan, shifting perks and benefits such as company cars, club memberships generally only apply to Japanese who head larger foreign capital subsidiaries in Japan and not to line managers. Cash packages, however, tend to be much higher in Japan than in the US and Europe reflecting a very high cost of living. As mentioned in last quarters article, while putting too high an importance on the candidates ability to speak English can be counter productive, Mr. Childs states that a premium is typically paid for English speaking, Japanese professionals who also exceed the other qualifications.
If you partner with an executive search firm, choose the firm that has the best local reputation, not the best global reputation.
The largest search firms in the world have offices in all the major markets, and it is convenient to ask for their assistance on your search. That firm, however, may not be strong in the country or the market you are searching in.
One of our clients, Integrated Measurement Systems (IMS), was looking for a director of engineering at a division based in Dresden, Germany. The search was originally awarded to a firm with a very good global reputation. Unfortunately, after six months, it was determined that the search firm had neither the correct technology contacts nor the direct recruiting methods necessary to successfully conclude the search. We were able through our international network to refer IMS to a boutique search firm based in Germany that worked exclusively for technology clients and had a great reputation for success. The search was successfully concluded in less than three months (very fast by German standards). Gwyn Harvey, vice president of human resources at IMS, stated, "The German partner you referred us to did a great job. The search moved more quickly than we expected, and we hired a great candidate who is doing exceptionally well."
Mr. Childs reports similar situations are common in Japan. This is particularly true where companies are seeking younger, more dynamic managers with experience in new technologies. Many of the old-line search firms in Tokyo are staffed with hierarchical, traditional business recruiters who have limited 'new economy or technology' contacts.
Ask questions about different languages, cultures, business norms, tax rates, and employment laws to ensure better hiring and operating decisions.
For example:
These are just a few of the many unique aspects in hiring internationally. Universally, however, everyone we spoke to agreed on one point: Expect differences in each geographic region; by learning and respecting those unique attributes, you will make better hiring decisions and avoid the likelihood of a highly expensive restart or replacement.