Outsourcing or Insourcing, Executive Searchers Help Bridge the Global Culture Gap for Companies

While outsourcing of U.S. jobs remains a politically charged headline issue, insourcing—the establishment of new positions in the United States, continues to rise as more and more companies set up operations here.

According to the Organization of International Investment, more than five million Americans are employed by the U.S. subsidiaries of foreign companies, earning an annual payroll of more than $300 billion. From Alabama, where Honda and Mercedes-Benz together account for some 6,000 jobs, to Wisconsin, where Fiskars Consumer Products, a Finnish maker of garden tools has just added hundreds of jobs in its Sauk City manufacturing plant, insourcing is increasingly important to the economy.

Jobs "Up for grabs" in Global Economy

As Michael Walden, who is William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at North Carolina State University, has noted "The scorecard on job outsourcing versus job insourcing has actually moved in favor of the U.S. in recent decades, and policy-makers must consider both when evaluating the worldwide movement of jobs. Jobs increasingly are up for grabs in a new world without economic borders (emphasis added)."

U.S. Remains Attractive Location

In our experience, the U.S. is still a very attractive location for foreign companies to match advanced technology and equipment with our highly skilled labor force and modern research techniques. For example, we see European pharmaceutical and specialty crop protection product makers moving their research operations to the U.S. to take advantage of the availability of talent and technology to develop new products, and of our free-market pricing, which permits them to earn an appropriate return on their investment when the products come to market.

Why? Because despite much higher U.S. salaries, when total taxes and benefits are factored in, it is more cost-efficient to do so. In another instance, one foreign company is moving its entire accounting operation here, replacing twenty jobs scattered round the world with two or three highly-skilled U.S. employees.

On the other hand, we know of European companies who are dispensing with the complex, inflexible contracts so typical of the Europe of yore to offer American executives top positions in their European and other non-U.S. operations, with the simple admonition to "Succeed." And if they do, they'll keep their jobs.

Worldwide Employment Trend

This marks a simple, though obvious trend in the movement of talent worldwide to the places where it is most needed—whether for reasons of market access, efficiency or low cost. As Professor Walden also has said, "With an increasingly globalized economy, more and more jobs will be candidates for both outsourcing and insourcing. The jobs most vulnerable for outsourcing are those performing routine tasks, not requiring close supervision, and where lower-cost foreign labor is readily available."

In our experience, insourced jobs are those often requiring in-depth knowledge and specialized experience in specific markets (often, niches with a significant technology component) that the non-U.S. company wants to target.

Big Challenge is to Bridge the Culture Gap

As more and more jobs move around the world, who helps to bridge the culture gap? When a U.S company establishes its accounting operations in Mumbai, who finds the American CFO who has lived and worked in India before? Or to whom does a French subsidiary turn for a CEO to head its new subsidiary in Omaha?

Whether at home or abroad, the challenge is to find the right executive who can straddle the world's continents—and cultures—because he or she has "been there and done that."

Cultural sensitivity is increasingly important as business reaches across the globe. The successful global manager must understand how people in other business cultures negotiate, see relationships from their perspective and understand how to structure a win-win solution with respect to the needs of all the business entities, to the needs of the market, and economic and political realities.

Most companies simply are not structured, nor do they have the resources to conduct an effective, timely search (particularly if it is international) for the executive who possesses the skills and cultural sensitivities necessary for success in today's increasingly complicated, borderless global marketplace.

Through our worldwide network and focused search process, Kincannon & Reed is there to bridge the gap and help companies meet their needs.

Until next time...

Kincannon & Reed
November 2004