Hong-Kong-based John Rice is among the most senior American businessmen ever posted to one of the world’s emerging markets. Number two to General Electric Co.’s chief executive officer Jeff Immelt, the 55-year-old heads the conglomerate’s global operations, and relocated from the U.S. last year in a move designed to accelerate globalization and to locate top executives close to the economies that now drive world economic growth.
At the same time, however, GE is recruiting managers who were born in emerging markets in order to draw on the expanding pools of educated talent in China, India and other developing countries - and to bring into the group an ever-wider range of professional - and human - experience.
“We will soon have 2,000 interns from outside the U.S.,” Mr. Rice said.
“This is 10 times more than a few years ago. We want to develop local talent - and to give aspiring leaders in our business a shot at senior roles. Management is always a blend of outside and inside talent.”
The result is a complex transformation at GE and many other multinationals, in which traditional career generalist expatriate managers are giving way to globally mobile executives - expats or locals - with deeper specialized skills and a wider range of backgrounds.
“The market is no longer dominated by Westerners but by global citizens. They can be of any ethnicity. But they must be mobile,” said Christine Greybe, Hong Kong-based president of DHR International, a recruitment agency.
Last year French industrial group Schneider Electric sent its human resources and strategy chiefs to Hong Kong to create an Asian management hub, in addition to its existing U.S. and European centres.
Dutch electronics group Philips last year switched the headquarters of its consumer appliances business to Shanghai. Last month German car maker Volkswagen appointed Jochem Heizmann, its 60-year-old trucks chief, to a new management board job in Shanghai to head the group’s Chinese operations.
For decades, a few multinationals that were traditionally based in the developing world have been run by Western expatriates based in developing-world locations, for example HSBC, the bank that started life in Hong Kong and Shanghai.
But the growth in emerging markets since 2000 is accelerating corporate globalization, and with it the nature and location of executive jobs. No longer are only country and regional managers based in emerging markets; executives with global roles are moving along with their headquarters teams.
Mr. Rice, who was previously posted to Singapore in the mid-1990s, says: “Then, you had career expats. Solid, good-performing people who were out and wanted to stay out, and didn’t have an interest in returning to the home country. They weren’t always people who were going to run GE. Now we have fully developed global leaders [in expatriate positions].”
Moreover, for high-flyers, emerging-market postings are increasingly compulsory.
“These [relocation] requests are becoming less like requests and more like instructions,” said Christoph Nettesheim, Greater China managing director for Boston Consulting Group.
The posts are becoming more demanding in terms of personal commitment. And there is growing competition for such jobs, from emerging markets as well as the West.
In principle, promoting developing-world staff is nothing new. Unilever NV, the Anglo-Dutch group, decided to “train Indians to take over junior and senior management positions instead of Europeans” as long ago as 1942, and has had an Indian as its main board director since 1978.
Royal Dutch Shell PLC, the energy group, and Citigroup Inc., the U.S. bank, are among other multinationals that pioneered the development of top executives from emerging markets, often India.
But the scale of today’s changes is unprecedented, headhunters say. Multinationals are seeking both to localize management - employing Indian managers in India, for example - and to diversify global teams.
At junior levels this saves money, because young locals are cheaper than imported expats. But higher up the corporate ladder, the cost differences have largely disappeared and the main incentive is to secure better in-country inside knowledge.
“The real switch has come in the past three years, where you have seen escalation in demand for global citizens. At least 50 per cent of searches at vice-president level and up are now for global citizens,” Ms. Greybe said.
Chinese and other emerging market-based companies are looking for similar people, which is also intensifying competition.
Occasionally they try radical changes, as when LG Electronics Inc., the South Korean electronics group, recruited foreigners for top posts in 2007 to 2008, appointing eight to an executive board of 10.
But more often, companies move steadily, hiring a few Westerners for senior roles and more at junior levels. Johnson Electric, the Hong Kong-based electrical group, Samsung Electronics Co. Ltd., the South Korean electronics group, and Reliance Industries Ltd., the diversified Indian conglomerate, are all examples.
LG is also now taking this approach: it parted company with its executive-board foreigners in 2010 after the global economic crisis struck, but like other South Korean groups it is now focusing on hiring and promoting foreigners in the lower executive ranks.
“At the time, we wanted to push forward globally. It was bad timing but we must keep globalizing,” said Ki Wan Kim, LG’s global marketing officer.
Westerners, however, still have the upper hand in the jobs market.
“More and more mandates say ‘find locals’, but at the end of the day westerners are hired because only they have the skills and experience,” said Jimmy Ho, managing director of the Guangzhou and Hong Kong offices of recruitment agency Korn Ferry.
In the long run, however, demographic forces favour emerging economies. McKinsey, the management consultancy, calculates that China and India already produce 38 per cent of the world’s graduates and will supply 60 per cent in 2012 to 2030. Not all will become executives, but many will.
Bringing together Western and non-Western cultures remains a challenge.
“There are more failures than successes, and the costs are humungous,” said Joseph Ngai, Hong Kong managing partner at McKinsey.
For GE, the answer is to develop managers who bring people together.
“You are optimizing big and global with local. It’s an art and a science which doesn’t work the same way in every case. The big challenge is to get past cultural barriers,” said Mr. Rice.
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